Free exchange: The hangover | The Economist

America is recovering from the debt bust faster than European countries, why?


The United States is farther along in its financial recovery than Europe, because of the focus on reduction in private debt, primarily as a result of mortgage defaults.  Austerity measures in Europe together with efforts to avoid mortgage default, and thereby reducing private debt, are postponing their financial recovery.

This article cites Sweden and Finland’s efforts to deal with their financial crisis in the 1990’s as a blueprint for success.  The crisis was addressed in two steps. First with efforts to reduce private debt, which lead to economic recovery, and then debt reduction by the government facilitated by the recovered economy.

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